1100 Millecento, BrickellHouse and myBrickell on the Brink of Selling Out
August 7, 2012 by Lucas Lechuga
I realize that I run the risk of sounding like your typical salesman, but it must be said - "This market is hot!". Over the past nine months in Brickell, three pre-construction condo developments - 1100 Millecento, BrickellHouse and myBrickell - were launched. I was made aware yesterday afternoon that only 20 units remain available for sale amongst these three developments combined! That represents 2.1% of their combined 948 total units. Only two units remain at 1100 Millecento, 8 at BrickellHouse and 10 at myBrickell. The first two projects haven't even broken grounded yet. If that's not hot then I don't know what is. Before anyone starts to chime in with bubble talk, we need to keep in mind that all three pre-construction developments require a very large portion of the purchase price to be paid long before closing. In the case of 1100 Millecento the buyer will have already paid 50% of the purchase price by closing. BrickellHouse and myBrickell are virtually immune from default risk with the buyer required to pay 70% and 80% of the purchase price, respectively, by closing. Like I said - This market is hot!
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just beacuse you have to put down 50% cash does not mean it is not a bubble. Are these end users for are these buys speculators, hoping to flip as soon as they can? I said it before that miami real estate goes through bubble to bust cycles. Congradulations, we are in another bubble, I am just waiting to see how long this one last and just how it ends. Has anyone heard from Joe lateley? Now is the time for him to chime in about how there are no good paying jobs to support the increase in rental rates… Read more »
Even if they aren’t end users it’s very hard to form a bubble when you’re paying cash. Typically these speculators would be putting down a modest deposit. These guys are paying 50% to 80% of the price of the unit essentially financing the construction of these units. So in effect they are being presold to a buyer with cash. Sure that buyer may simply want to rent it out, but even if he doesn’t find a renter at the right price that isn’t going to cause any bubble to burst. For example let’s say you buy a unit hoping to… Read more »
lol, licking their wounds i guess.
Gixx, I respectfully disagree with your assesment. Many of these people are foreign buyser and that fact that they paid cash for the building does not mean that the will not sell if they find better way to deploy the money. If anything as a cash buyer they have more flexibality when it comes to dumping the units. Say I buy one of these condos for 500k expecting to rent it out for 3k/mo and I am happy. Now lets assume 4 years from now financing for these builders loosen up and there are several more buildings online and 3k/month… Read more »
Well I guess we’ll disagree. Your assessment is the opposite of what I see when dealing with our investors. People who tend to pay in cash are not searching for high returns. If they were then why would they pay cash when they could easily just put in less money and get a higher return from leverage? Sure it would be more risky but that comes with the territory when chasing high returns. People paying cash are simply looking for a safe place to park there money for a while, and in most cases they certainly don’t need. If a… Read more »
you are talking about investors, as soon as they see the grass greener somewhere else that where they will move their money. A person with a mtg is usually tied to the community by friends, family or a job. foreign investors are not. You said “People paying cash are simply looking for a safe place to park there money for a while”. If prices drop they will be the first ones out beacuse they want to preserve cash, If rental rates drop, taxes or HOA rises too much or even too many bad tennants I am willing to bet they… Read more »
wow, I butchered that up. My apologies! I would like to blame my computer for the misplaced text.
MMT, You seem to be missing the bigger picture. In the run up to the last boom prices were trading on SPECULATION. Meaning there was no proven value to the pricing it was just at $XXX per square foot because another unit sold for the same amount. So when the speculator got stuck holding the investment when it didn’t go up in price like he thought he had no one to rent it to in order to cover the holding cost so he was stuck and had to foreclose. But now investors are buying the units CASH based on prices… Read more »
Gixx – “In order to be a bubble prices have to be inflated based on speculation. If a unit that cost $400k has carry cost of $2500 and renters are willing to pay $2500 for that unit then how can there be speculation? The pricing is being set based off the market.” Ha, Don’t follow your logic! This IS the defination of speculation. why spend 400k to break even every month. What investor do you know that is willing to risk 400K for a 0% return? If that is the case why not buy us tresuries, make a small return… Read more »
Speculation: the practice of engaging in risky financial transactions in an attempt to profit from short or medium term fluctuations in the market value of a tradable good such as a financial instrument, rather than attempting to profit from the underlying financial attributes embodied in the instrument such as capital gains, interest, or dividends. “Ha, Don’t follow your logic! This IS the defination of speculation. why spend 400k to break even every month. What investor do you know that is willing to risk 400K for a 0% return?” They’re assuming there is going to be some price appreciation. If you… Read more »
“I guess we’ll agree to disagree but if you think a investor assuming a piece of real estate will appreciate 4% and that rents will rise 4% in line with inflation is speculation then your logic is way off.” We have had one year of price appreaciation and 5 years of decline, how do you come up with 4%? I do consider that speculation when you add in other factors like the smart Investors bought back in 2009 and 2010 when the numbers made sense. There is also a thing called price resistanc and affordability. Will the renters continue to… Read more »
Brickell condo rents rise as early buyers sell By Marilyn Bowden Demand is pushing up rental rates in Brickell’s residential condos, even as some of those units begin to trade. “It’s getting harder to find a good rental at a good price,” said Alexandra Goeseke, an associate at Cervera Real Estate. “The good ones are going quickly.” Brian Carter, a broker at Majestic Realty, said even through the summer, generally considered the offseason, rates are competitive and rising. “I rented a townhouse for $1,850 a month two years ago,” he said. “Today, it’s renting for $2,100 — a 13% increase.”… Read more »
MMT, Usually I agree with you but you have no clue about foreigners+Miami. They are not just investors. They are emotionally tied to Miami be it South Americans, Canadians or Europeans. Why do you think all the foreign money came into Miami flats and not Las Vegas flats when there are better deals there and and still are? Simple: They don’t care about Las Vegas or Torremolinos or Sitges where you could buy a gorgeous condo in the Sun for less than Miami. That is the reason why Miami bottomed out in 2010 a full 2 years before rest of… Read more »
I agree with you wholly. I am the one who constantly argued with joe that miami was/is a special place and that the rules that apply to the rest of the country does not apply here. I also suggested to those interested in buying should have done so in 2nd quarter of 2009-2010. My problem is that now prices/rents have appreciated quite a bit to the point were they are almost back to the point where this mess started. The article gixxer posted says many of the early investors have already sold out at a hefty profit. now we have… Read more »
4% is a very conservative number. Inflation is in the 2% to 4% range range over the past year. You can’t have inflation at 3% and rents not going up because inflation is based on among other things housing cost increases. You basically taking concepts that you don’t fully understand and trying to make arguments based upon you layman’s interpretation. How can rents be back to where this whole thing started when this whole thing wasn’t based off of rents???? In 2008 ICON was selling at $700 SF. That would mean an 800 SF one bedroom would cost around $550k.… Read more »
Love affair is a better word to describe than emotional ties to Miami. My bad.
Well, a friend of mine just left the Luxurious 50 Biscayne and moved back to a rat infested Sobe hovel (exaggeration). The unit got sold for a nice profit and these renters had to move out. I have no idea how long this will last. But I can say one thing. It will last for a while. Just got back from Mary Brickell Village on a weeknight. It is not even a Friday or a Saturday but there are Traffic jams, packed, jam packed bars and restaurants all around. It is as busy or even more busy than Lincoln road… Read more »
AJ, I agree with you here. The people who are renting downtown are people who would otherwise be renting in places like Miami Beach. For the same money you can get a bigger unit, in a better building with more amenities, better parking, etc. In 2007 they would to have given up on living in a great neighborhood. However in 2012 that is no longer the case. And what is there now is only the tip of the iceberg. Mary Brickell village is only about 200,000 SF and that is with a publix. Citicentre is going to have 520,000 SF… Read more »
I’m sorry gixx,
I don’t know how this discussion got so off track. I will take the bame for that. I thought you said that anyone can get a 12% return without even trying, in a recent post? Now you argue 4% retrun on 400K cash investment in Miami condo rentals is not speculation but a good investment. Ok, I’ll take your word on that, where do I sigh up? There is a saying that when you are a hammer everything looks like a nail. I’ll leave it at that.
I just came across this in this from a recent discussion “Downtown Miami/Brickell is a nice place to live. Right now rents are in the $2.00 a sf range. So a typical 1200 sf 2/2 is about $2,400. Most people are currently renting at about 30% of income. For rents to get to 60% of income rents would have to essentially double. There is NO possible way this happens. People would immediately move out to places that are close with less rent. There are a lot of average new buildings up near 20th and biscayne on the west side of… Read more »
Because you don’t work in finance you are confusing a lot of arguments. The 12% cake walk return I was referring to was a leverage return. That is to say a return when you are using leverage (credit, debt, etc.). Leverage obviously increases you’re return because you are getting access to the same income with less money. Here we are talking about an investor getting a cash on cash or unleveraged return. Let’s say I bought a condo for $400k CASH and I charge $2500. I’d probably have to pay about $650 for taxes and another $550 for HOA fees.… Read more »
As to your other comments about Percent of income I don’t get what you are trying to say. AJ was saying that rents were going to go from 30% of income to 60% of income. That would mean rents would have to DOUBLE. As in go up 100%. I said there is no way in hell that would happen. Instead I’m saying that rents will stop going up at 7% and instead only go up 4%. And since most people salaries go up 3% to 4% anyway that would mean if they are paying 30% of their income now they… Read more »
Gixxer – “Because you don’t work in finance you are confusing a lot of arguments” Well, I’ve only worked for 12 years on wall st. at the largest investment banks dealing with investment finance. I’d like to think I’ve retained at least some of the training they paid for. It has been a while since I left so maybe I am in need a refresher. Right now I manage my own portfolio of Investment properties. This is why I can tell you that your numbers on paper looks good but in practice they are off. First, your 16% IRR on… Read more »
Yeah, you may want to go back and fresh up on your skills because you still keep confusing terms. Their is a difference between a 4% yield and an IRR of 4%. But just like Joe lets wait a couple of years and you’ll see how stupid you sound. But you got me, I don’t own 1 or two condos and I do work for a company where we own over 10,000 units. We have our own property management business to manage just our units. I’ve personally underwritten the acquisition of over 2,000 of those units, over 1/2 billion. We… Read more »